What is a Growth Stock?

BellaMike Bellafiore's (Bella's) Blogs1 Comment

This week I wrote a post Study Trading not Markets ($TSLA)¬†where I shared the power of studying trading patterns over stock fundamentals. After all I play the game of trading pro not economics professor or Uber-Confident Financial Media Entertainment Complex Guest. My job is to make excellent risk/reward decisions with my firm’s money to which for some trades longer term company fundamentals may not be relevant.

It is our job as pro traders/investors to understand when fundamentals matter and when they don’t. There have been a lot of fundamentalites playing pro trader/investor on the Financial Media Entertainment Complex of late with their big Short TSLA idea who are not pros at all. (And I bet you these guys stay at the Four Seasons and not a Holiday Inn.) I say again: GROWTH STOCKS DO NOT TRADE BASED ON FUNDAMENTALS. This prior post had an important impact on the trading/investing of many given my inbox. There is one issue I should clarify. What is a growth stock?

During a one day trading course in Asia, with students wanting to learn how to navigate US markets, I clarified the definition of a growth stock:

  • No ceiling on earnings
  • Cocktail party chatter
  • Buzz about the stock
  • Hot stock
  • Does not trade based on P/E

To make a growth stock trade/investment consider:

  1. It is really a Growth Stock?
  2. High Short interest of at least 20 percent
  3. 2xs ATR of late
  4. Important Technical Level for Entry
  5. Little Technical Resistance Ahead
  6. Increasing Volume
  7. History of Explosive Upmoves
  8. R/R of 10×1 and Swing Trade it
  9. Pray for pundits on the Financial Media Entertainment Complex to shout it is overvalued

I hope that helps.

You can be better tomorrow than you are today!

Mike Bellafiore

One Good Trade

The PlayBook

 

no relevant positions

One Comment on “What is a Growth Stock?”

  1. There needs to be a class in finance programs that somehow combines traditional valuation taught by capm, modigliani & miller, and other corporate finance concepts with growth stock valuation which seems to have almost zero rules. Further finance classes need to revamp their teaching to consider that 70% of trading nowadays is done by HFT’s and not humans who in the past used traditional valuation much more in their trading/investing decisions.

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